Cash Management Essay
Cash management techniques are an important part of managing finances. It is impossible to see your money grow if there are not methods in place to make the most of the money that you have. A good start to cash management is budgeting, which is the process of tracking money in and out to get a better idea of how money is really being spent. A budget identifies where the money is going and where adjustments can be made to decrease expenses or increase revenue. Along with budgeting, it is important to track expenses in order to know how much money is being spent.
Expenses can be divided into categories such as office supplies, rent and utilities. Once you have the expenses clearly laid out ways to decrease the expenses can be found which will allow the company to save money. One easy way to save on office supplies is to buy in bulk or buy direct from a distributer. This will get you a lower price for the items then at retail store and can help save money. Another example is with companies that have vehicles. Gas companies offer discount cards which could be used with all their purchases to save money.
Additionally, companies that operate fleets of vehicles may benefit from contracting with a gas supplier to get their gas at a greatly discounted rate. Investing is a great way to make your money generate more funds. This can be done by investing the money in various ways to allow it to generate interest. The more money you invest or the higher yield accounts that the money is in the more you will get in return. For individuals, investing in a 401(K) plan at work is a great way to save money for the future.
This money can be deducted directly from the paycheck before it is received and invested into the account. Some companies will even match the money that is deposited into the account or match a percentage of the money. This helps the account grow even more. Having the money deducted from the paycheck before it is received is helpful because that money isn’t missed. It was taken out before the check was received and doesn’t have to be calculated into a family’s budget. Companies can invest their money into bonds which will generate interest and return for the company.
Additionally, they could invest it in the stock market or other markets and savings accounts where they can get a return for the money. This helps the companies increase their cash and their wealth. In addition to investing, companies need to make sure they are collecting on accounts. When they have accounts that are past due, companies are losing money and this money needs to be regained. The accounting department of a company needs to keep close watch on the accounts and identify the ones that are not being paid. These accounts need to be collected in order to minimize the loss of income for the company.
Lines of credit are necessary when there is a decrease in cash flow. This could be due to a slow month with a decrease in revenue or income as well as an increase in expenses. Companies and individuals need a way to cover expenses when the cash is limited. Credit plays an important role at this point. For the individual there are credit cards and home equity loans to help cover expenses when the cash isn’t available. These options however should be used sparingly as it is best not to use credit and credit can be maxed out if an individual is spending more than their income.
Companies can use lines of credit to help cover additional expenses or regular expenses when cash flow is limited. One example of credit used by a company is a short term loan. This can provide the business with extra liquid cash that they can use to make ends meet at the time and will have to be paid back in the following months. Like with the individual, if a company is using loans frequently they will find themselves in debt and unable to repay it. At this point the company needs to reevaluate the structure of the company and identify ways to decrease their expenses.
Generating additional income is important because you want to maximize the amount of money being brought in while minimizing the money going out. The individual person can maximize the money coming in by working extra hours at work or getting a second job. If a person has a unique skill they can market themselves in their free time to make money from that skill such as sewing or construction. Companies can generate more income by increasing marketing campaigns or expanding into new sales markets to generate more money in return.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 5 November 2016
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